Journal of Applied Finance & Banking

Announcement Effect Study of Issuing Tier 2 Capital Bonds on the Stock Price of China Construction Bank

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• Abstract

   

  This article uses event study methodology to empirically analyze the announcement effect of China Construction Bank's issuance of Tier 2 capital bonds. The results show that firstly, the announcement of the issuance of Tier 2 capital bonds has a positive impact on the stock price of China Construction Bank, with a positive abnormal return during the event study window. Secondly, the abnormal return is significantly higher from the 6th day to the 14th day after the announcement, indicating that the positive announcement effect occurs approximately one week after the announcement and lasts for one week. Based on these findings, policy recommendations are proposed: Firstly, China Construction Bank should choose an appropriate opportunity to issue Tier 2 capital bonds to achieve the goal of reducing capital costs and increasing the bank's market value. Secondly, regulatory authorities should strengthen supervision to prevent insider trading and enhance financial market reform. Thirdly, short-term investors can choose to buy after the announcement of the issuance of Tier 2 capital bonds by China Construction Bank and sell around 14 days after the announcement to obtain abnormal returns.

   

  Keywords: Tier 2 capital bonds, Announcement effects, China Construction Bank.